Court Rolls Back Cure To Odometer Tampering

Appellate Judges Reject Huge Punitive Damages To Defrauded Car Buyer

February 18, 2001|By Judy Peres, Tribune Staff Writer.

When Mike Perez bought his 1990 Cutlass, the dealer said the car's only previous owner had driven it just 28,000 miles.

So when Perez discovered it actually had seven previous owners and close to 100,000 miles, he sued and won $500,000 in punitive damages, which a federal judge ruled was necessary to discourage such fraud.

Now, as a result of a little-noticed appellate court ruling, victims of odometer fraud in Illinois will find it a lot harder to win that kind of money.

And by overturning the punitive damages award, consumer advocates say, the court eliminated a major deterrent to a crime that already goes undetected and unpunished far too often.

The July decision, which is being appealed to the U.S. Supreme Court, "declares open season on used-car buyers," said Rosemary Shahan, president of Consumers for Auto Reliability and Safety.

The court was due to consider Perez's petition in its conference Friday and to signal this week whether it will hear the case.

More than 9 percent of used cars sold in Illinois have had their odometers rolled back or disconnected to hide their actual mileage, according to a market survey published last year. That's more than 150,000 cars a year. Nationally, there are millions of such cars on the road.

And the problem is not limited to older models. Jeff Kiser, who investigates odometer fraud for the Illinois Secretary of State's Police, cautions: "Any odometer--even the new, digital ones--can be tampered with."

Richard Morse, director of odometer fraud in the National Highway Traffic Safety Administration, estimates that the rollbacks cost U.S. consumers up to $10 billion a year. They also pose a threat to public safety, because car owners think the vehicles are in better condition than they really are.

Perez, 45, a single dad with two boys, found that out the hard way. In 1993, Perez went to Z Frank Oldsmobile in Des Plaines looking for a low-mileage car. According to court documents, the dealer talked Perez into buying a 1990 Cutlass Supreme that cost $11,000, saying the car was in perfect condition.

But things started going wrong almost immediately.

Perez ticks them off: "The alternator died. The rack and pinion [steering] went bad. There was always something wrong with the brakes.

"The car would die after running for a few minutes. The heater coil cracked and anti-freeze leaked into the interior. The display on the digital speedometer went out, so I couldn't tell how fast I was going.

"There were so many problems, I can't even remember them all."

After shelling out thousands of dollars on repairs, Perez tried to sell the Cutlass. That's when he learned the car actually had seven other owners, including a rental agency, and that the fourth owner had turned back its odometer by 70,000 miles.

That is illegal. Congress and numerous state legislatures, including Illinois', have statutes that outlaw odometer tampering. On top of providing jail sentences and fines when the government prosecutes, odometer statutes typically give consumers the right to sue for damages up to three times their loss.

State common law also provides for punitive damages where the buyer can prove the fraud was intentional. While regular damages compensate consumers for what the fraud actually cost them--often very little in the case of a used car--punitive damages are intended to punish the cheater and deter others. Plaintiffs in Illinois and elsewhere have been awarded tens of thousands of dollars in such cases.

Despite the safeguards, however, criminal prosecutions of odometer fraud are few and far between. The crime is difficult to detect, and the damage often isn't enough to justify going to court.

In Illinois, odometer tampering is investigated by the Secretary of State's Police, which gets about 1,000 complaints a year, but only about 20 percent result in charges.

"We look at the merits of every complaint," said Sgt. Jim Kazimour. "But a lot of times all the consumer has is ... hearsay."

Even when his investigators find enough evidence for a successful prosecution, judges award restitution to the victims in less than half the cases. For aggrieved consumers, that leaves private lawsuits. But such suits are rare. Many victims can't afford to retain a lawyer, even if they can find one willing to take the case.

Bernard Brown, a Kansas City attorney who specializes in consumer car fraud, estimates there are about 11,000 rollbacks for every suit that's filed.

"The vast majority of used-car buyers never know what happened," he said. "They think the transmission went out awfully early, or it was just a crappy car.

"The stakes are small--you're talking $10,000 to $15,000 cars. You have to prove fraud, which is one of the hardest things to prove. And the evidence frequently has to come from two or three different states."